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Impact of Budget 2022 on the fund sector and GIFT IFSC

By CA.Aditya Sesh   Basiz Fund Services  

For a few years now, the Government has been continuously providing incentives to India's only Offshore regime currently located in GIFT City, Gandhinagar. As a result, the domicile is now beginning to compete well with our nearest domiciles for the offshore fund industry, namely Mauritius and Singapore. In this budget too, the reforms and encouragement have continued without a break. Following are the key proposals placed before Parliament for approval: Exemption from the income tax on income derived from derivatives. While similar benefits were provided in the previous year, this seems to be an amplification of what was provided in the past. Similar exemptions have been provided on the incomes of portfolio management Service managers. The details will reveal the exact nature of the proposal. Ship leasing and Aircraft Leasing are counted as new sunrise sectors within the relatively new domicile of IFSC. It is proposed that exemption from income of leasing of Ships be granted. This will motivate shipowners to fly the Indian flag on the ships and increase the tonnage registered from India. It will also reduce the dependence of ships with foreign flags bringing in and taking out cargo from Indian ports, thus saving valuable foriegn exchange to exporters and importers. For a long time now GIFT IFSC has been thought of as an education and learning centre for those students who want to go out of India for advanced learning. However the education policies of the domestic sector were not in sync with the International practice. That has now been decoupled and International parity can be achieved. This move will also help the country save foreign exchange while allowing students to learn from good global educational institutions, who will now set up educational centers in GIFT IFSC. It is apparent now that the government thinks that the fund industry can organise large volumes of capital to fund business and infrastructure development in the country. Therefore it is proposed that an expert committee of the PEVC industry will be set up for the improvement of the Industry further. India is now the largest FDI nation in Asia. The setting up of International Arbitration centers is an important development. Setting up such centers in GIFT IFSC will enhance the reputation, image and provide a practical time bound dispute redressal mechanism. It is to be noted that GIFT IFSC center already hosts the Singapore International Arbitration Center. Many such institutional arbitration mechanisms will now be set up in offshore and domestic centers. There has also been a cap on the surcharge paid on capital gains. This move is welcome. The Government proposes to act as Sponsors, on the funds managed by private fund managers, specially in the areas of infrastructure. The government now may invest 20% in such Alternative Investment Funds. Author Information CA. Aditya Sesh, Managing Director, Basiz Fund Services M: +918286008554, E: sesha@basizfa.com http://www.basizfa.com